ERC-20

ERC-20 is a technical standard, defined in Ethereum Improvement Proposal EIP-20, that specifies a common interface for fungible tokens on Ethereum. Fungible means each unit is interchangeable with every other, like units of a currency. By implementing a shared set of functions, any ERC-20 token behaves predictably, so wallets, exchanges, and applications can support new tokens without custom code for each one.

Why it matters

The standard defines mandatory functions including totalSupply, balanceOf, transfer, transferFrom, approve, and allowance, plus optional details such as name, symbol, and decimals. This shared interface is a large part of why the token ecosystem grew so quickly: interoperability is built in. The approve and transferFrom pattern, which lets a contract spend tokens on your behalf, is also a common source of risk if approvals are granted carelessly. Many drains occur when a user approves an unlimited spending allowance to a malicious or compromised contract, so reviewing and periodically revoking token approvals is a practical security habit.

Common misunderstanding

Following the ERC-20 standard is often taken to mean a token is safe or legitimate. The standard only defines the interface, not the intent behind the code. A contract can be fully ERC-20 compliant and still be a scam, for example by minting unlimited supply or including hidden transfer restrictions. Compliance describes how a token can be interacted with, not whether it is trustworthy or the project behind it is honest, so the standard should never be read as a safety guarantee.

Related terms

See NFT, honeypot token, DeFi and blind signing.